Covid-19 highlights the importance of and urgent need to build ‘digital cocoons’ for the whole population.
The Covid-19 series of lock-downs have brought very different experiences for varied segments of society: the contrast cannot be starker than the social media posts of fancy meals at home compared to the long walks back to hometowns. What explains the difference? Those who have been able to weave a ‘digital cocoon’ have done comparatively better than the real-world migrants.
A migrant moves location for economic activity, whether a job, business or studies. In case of a real-world migrant, her presence at the site of the economic activity is sine qua non – there is simply no way that the activity can be performed without the person being there. In the case of a ‘digital migrant’, however, a virtual presence suffices. Juxtapose the move of migrants to their hometowns with the initiatives that many companies are now running to empower their employees to ‘work from home’ (WFH) or indeed, ‘work from anywhere’ (WFA) and the contrast is explained clearly.
The forces acting on the movement of people is divergent: in one case, migrants will have to come back to cities for work; in other, they can head back to smaller cities and towns to log-in from anywhere. Depending on how many and how quickly our citizens are able to build their ‘digital cocoons’, it will have massive impact on urbanization, real estate, transportation needs, working contracts, among many other effects.
Building a ‘digital cocoon’
Five elements are required to build a sturdy ‘digital cocoon’: the ability to (1) get on a network, (2) communicate and connect, (3) add value, (4) make and receive payments and (5) access assets and liabilities.
Identity and access: With UID in place, India has been able to address the challenge of identity to a very large degree. However, in spite of some of the lowest prices in the world, a recent IAMAI report notes that access to internet in India is still limited to only around 40% of the population. This ‘digital divide’ automatically precludes a majority of the population to build their ‘digital cocoon’. Similar to the bijli-sadak-paani narrative of infrastructure development in the last quarter century, the next leg of public infrastructure investment will include access to the digital world: both in getting the relevant devices and also the ability to connect.
Communication and connection: For those on the digital platforms, communication and connection are solved for by a wide number of applications from social media platforms to the gig-economy apps. Communication is cheap and easy with the profusion of audio and video calls and the ability to host and broadcast large events on stable platforms: in many cases, these come free and hence access is not a challenge. Over time, communication and gig-economy apps will start to become public utilities: for example, cities could start building ride-sharing apps for its citizens by linking its various modes of public transport on a city app.
Add value: The primary and secondary sectors of economy (agriculture, manufacturing, construction) have a large physical component in their value-addition. These sectors (think cars, clothes, medicines, chemicals, etc.) work on real things requiring physical activity – these sectors will see more mechanization or farming away of work to fancier technologies like robots or drones. The services sector, on the other hand, has been able to move its processes and outputs into the virtual world and hence is able to weather the Covid-19 storm somewhat better. Personal services like salons and spas will need to adapt to the changed world, just as services like auditing and consulting have. Mechanization and digitization of processes, coupled with the Internet of Things, will be an inevitable outcome of this pandemic. This change will upend many current processes and will call for significant policy dexterity.
Make and receive payments: India is a leader in the digital ecosystem for payments. UPI, and the various consumer-facing apps built on top of it, have made accessing payments easier. Note however, that this still remains constrained by the access to internet and reasonably-smart devices. Similar to identity, access to bank accounts has been largely addressed in India. The increase in currency in circulation post demonetization and the lines to withdraw monies from bank accounts during the lock-down indicate that there is still a significant section of the society that needs physical cash for their needs. The goal of building a less-cash society will need to be relentlessly pursued.
Access assets and liabilities: Payments, or medium of exchange, is one aspect of the use of currency, the other is its use as a ‘store of value’. For those with financial assets that they could access at a click, the impact of lock-down was not as severe (even if the value erosion due to mark-to-market was severe). Those who have largely physical assets may not notice the mark-to-market gains or losses on their holdings but have seen issues of liquidity. Physical assets have traditionally been used to create lines of credit – however, the paperwork in such cases requires significant physical activity. Digitizing asset records and making them available as security will help create a more seamless flow of liquidity.
A national priority
At each step of building the ‘digital cocoon’, a significant number of citizens currently drop-off. A specific agenda to pull as many of our fellow-citizens into the digital cocoon – and keeping them there – has to become a national priority. Building a ‘digital cocoon’ does not mean detaching from the physical world. For many things, from consuming food to accessing healthcare, the physical world will still be around. However, the ability to be able to get into a ‘digital cocoon’ can offer protection to individuals and society in times of sudden crises.
The author is Head, Strategy and New Initiatives, Axis Bank. Views are personal.
Originally published in The Financial Express.